LATEST THINKING

Investment Banks: Beware Bespoke

OVERVIEW

Investment banks' reliance on customized, in-house legacy technologies is costing them, in an age where cloud savvy competitors use technology to achieve game-changing Return on Equity (RoE). Accenture research shows that moving to as-a-Service, cloud-based solutions could earn large banks an average of 1 to 2 percent increase on RoE, the equivalent of $1.5 billion.

Given the competitive situation—60 percent of capital markets institutions say that cloud-based entrants will challenge traditional industry models—moving to as-a-service (aaS), cloud-based solutions is a logical route for investment banks to take now, before restless shareholders begin banging the drums.

KEY FINDINGS

RegTech is upon us.Regulators have realized they are mutual benefactors in the move to cloud—so much so that three in four banking executives agree or strongly agree regulatory concerns around cloud have been eliminated.

Prêt-à-porter processes are fueling growth.The Fintech sector is growing, with US$15 billion in funding as of August, 2016. This growth is fueling an explosion of easy to adopt, cost-effective SaaS and BPaaS solutions. While IaaS and PaaS cloud solutions are driving much of the optimization of existing IT within banks, Software-as-a-Service (SaaS) and Business-Process-as-a-Service (BPaaS) solutions present opportunities for banks to create entirely new cloud-enabled operating models, moving traditionally in-house delivered technology and processes to as-a-service models.

Developing a multi-speed IT operating model to support the investment bank’s journey to cloud, taking into account needs that will arise when introducing XaaS models alongside traditional, in-house and bespoke delivery methods

BLACK HOLE TO WHITE GLOVE

Client onboarding makes or breaks client relationships. In investment banking, it is broken. So broken that nearly one-third of institutional clients abandon the process before completing it because they are dissatisfied, according to Accenture Strategy client experience.

An industry that has seen profits shrink for nearly a decade (per our analysis of quarterly financial filings) cannot sustain black box onboarding. While onboarding will always be complex thanks to regulators, there are client-friendly and revenue-generating ways to manage it. They offer banks a rare second chance to make a first impression to protect and grow the client base.

Investment banks have opportunities to transform onboarding. But only if they acknowledge the problem and make changes:

This is the Wild West. No department or leader owns end-to-end onboarding from the client’s perspective. Incentives and governance models are not aligned across departments to allow groups to act uniformly in service of clients’ interests.

New value is waiting. Our client experience and analysis of industry benchmarks reveals that by decreasing onboarding inefficiencies and increasing accountability, banks can realize up to nine percent in potential revenue growth, reduce costs by up to 18 percent, and cut time to trade by 25 percent.

Technology is not magic. Our experience confirms a landscape littered with well-intentioned and expensive technology implementations that did not address process, governance or ownership issues. At best, these initiatives were temporary fixes. At worst, they were failed projects.

“Investment banks can finally cut time to trade by 25% while reducing costs and growing revenue.”

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